Danny Alexander (Inverness, Nairn, Badenoch and Strathspey) (LD):
It is a great pleasure to follow the hon. Member for Newport, West (Paul Flynn), who made a number of important points. The process for debating benefit upratings simply does not allow us to
have a proper discussion of the adequacy or otherwise of benefits, to which the hon. Gentleman referred. It is important to improve parliamentary scrutiny so that we can properly address that issue, perhaps once every Parliament, and ensure that we do not lose sight of the genuine problems caused by the inadequacy of some of the benefits, as highlighted by the hon. Gentleman.
Liberal Democrat Members welcome the uprating statement. As the Minister said, it is a matter of great importance to every constituency that an additional sum in excess of £4 billion will be put into the benefits system as a result of the uprating. However, in common with the hon. Member for Hertsmere (Mr. Clappison), as I listened to the Ministers opening remarks about the wider context, I felt that his analysis revealed a degree of complacency. The Minister was quite right to point to some improvements, but in view of the poverty statistics when the Conservatives left office and how bad the situation was then, we should regard some improvement as a bare minimum. Although there have been certain improvements, the situation is not as good as the Minister set out. In the interests of having an objective debate, it is also important to recognise where there is a desperate need for improvement. Nowhere is that more obvious than from a study of the poverty statistics, particularly those for child poverty, which is greatly affected by the benefits system.
We talk a lot about child poverty and pensioner poverty, but we do not give much air time to poverty among people of working age, which is a serious problem. How adequate the relevant benefits are in relieving that poverty is a genuinely important issue. Similarly, the Minister cited, as Ministers often do, the improved statistics on the numbers of people in employment, but what he did not say is that even with those increases, it is still the case that todays employment rate is no higher than it was at the peak of the last economic cycle in 1990. For all the improvements in employment levels highlighted by the Minister, and the consequent reduction in the number of people on benefit, there is a still a huge way to go if we are to meet the target of increasing the employment rate to 80 per cent., for example.
The need to go further is particularly true in respect of some of the groups to which the uprating statement applies. I refer specifically to the number of people on incapacity benefit, which has remained stubbornly high2.7 million when the Government came to office and about 2.6 million now. Despite that small drop in claimants, one of the greatest failures of welfare reform is the fact that we still have more than 2.5 million people in receipt of incapacity benefit despite all the evidence that a very large proportion of them would like to be able to work, if only the help and support were available to assist them in doing so. Likewise, the number of children living in workless households has remained stubbornly highanother matter to which I shall return.
Let me make some general points about the uprating statement. The first issue that needs to be highlighted is the complexity of the benefit system. Complexity is often pinpointed as an issue in the abstract sense, but it is also a very real and direct issue because the systems
complexities have a direct effect on peoples ability to get back into work. People often cannot judge whether they will be better off in work, and in some cases they may well not be. In going through the detail of the uprating statement, as I am sure hon. Members have, we find that more than 400 different rates, tapers, allowances and premiums are being either uprated or, in some cases, not uprated. In fact, to describe the statement as uprating is slightly misleading. In reality, it is a non-uprating statement, because more than 100 of those rates, tapers, allowances and premiums are not being uprated. Many have not been uprated for some years. In a welfare system in which people, depending on their needs and conditions, face about 450 different benefit options, it is little wonder that some find that system highly complex.
Ours has been described as the most complicated welfare system in the world, and it is hard for many of our constituents to navigate their way around it. While I welcome the improvements that the Government are making in relation to pensioners being able to make one phone call to claim several benefitsthe Minister referred to thosemany people who are not pensioners have needs that are just as great and find the system almost impossible to navigate. I hope that the Government take more cognisance of the importance of the issue of complexity and do more to simplify the benefits system.
I put one proposal on the table, which Ministers have previously welcomed in general terms, as did the recent Freud reviewthe introduction of a single working age benefit. That significant simplification would make the landscape for people of working age much easier to understand and it would promote people getting back into work. Good intentions have been expressed on the issue from time to time, not least by the new Secretary of State during Question Time on Monday, but I hope that the Minister will say that we can achieve some progress in investigating it. I think that would bring great benefit to this country.
Likewise, in considering the range of different items that we are uprating today, it is important to realise that part of the complexity is created by the means-tested nature of those benefits. That is particularly true in relation to pensioners. I shall return to that matter.
The next general issue is one that the hon. Member for Newport, West highlighted. In some cases, the benefits that we are uprating are inadequate to meet the tasks that we set for them, and that is expressed nowhere more clearly than in the poverty statistics. The hon. Member for Hertsmere highlighted from the Conservative Front Bench the problems that we have with many of the poverty figures, such as the recent rises in child poverty and the recent rises in poverty among people of working age. The Minister made the point that things have got better since 1997. That is true, but the more recent statistics suggest that there has been a change in that trend. We await the next set of figures to see whether that is continued, but none of us should be complacent about it.
That applies, too, in the context of the rising inequality in British society. Let us consider the recent statistics on that front. The Gini coefficient, which is the recognised measure of inequality, is rising again.
The Gini coefficient in the most recent year for which figures are available is the same as it was when the Government took office, so inequality is also a huge factor here. The latest figures suggest that child poverty is going up, and those for 2005-06 were 500,000 higher than the Government would have needed to meet their target for the previous year.
It is right to debate the question of child poverty: the targets are to halve child poverty by 2010 and to abolish it by 2020, but a great deal more needs to be done if those targets are to be met. I am happy to reiterateI note that the hon. Member for Hertsmere did not explicitly do thismy partys commitment to the goal of ending child poverty by 2020. I had hoped that that was a matter of cross-party agreement.
The Government are way off beam in terms of meeting their targets, so I hope that the Minister is listening to these points and will take them back to his colleagues. Those targets are important and I hope that Members in all parts of the House share in that.
It is interesting to note that the Departments Harker review highlighted the fact that the important area to focus on in tackling child poverty is the impact on familiesoften two-parent families in which no one is working and people who might be receiving many of the benefits that we are dealing with today. There has been little progress on that front.
I think that in addition to our annual debates on uprating orders which, as has been pointed out, are not amendable, there should be a process allowing more general questions about the adequacy of the benefits system to be reviewed, perhaps once in each Parliament. There could perhaps be an independent review leading to a parliamentary debate. The Minister will say that there are enormous financial implications, and that is true, but none the less we need an opportunity to discuss those broader questions.
Much of what the Government are doing with the benefits system is rightly intended to get more people off benefits and into work. We share the objective, but it must be said that mixed messages does not begin to describe the range of signals that have been sent to people on benefit over the past few weeks in the pronouncements of various Ministers. On the one hand, it seems that people in social housing will have their houses taken away from them by the Housing Minister if they do not comply with the Governments requirements. On the other, what the Prime Minister has said suggests that additional sums are likely to be payable to those who try to find their way into work. Most recently, it has been proposed that people should be obliged to work for four weeks when they have been on benefit for two years.
None of that has been mentioned today, but it suggests that, after 10 years of no success on the broader issues of welfare reform, the Government are anxious to give the public the impression that they are tough on those issues. I think their record shows that they should make much more effort to invest in the support that is needed to take people off benefits and return them to work. The macho talk that we are hearing is not particularly helpful, although I recognise that the benefits system should contain a degree of conditionality to deal with those who choose not to comply.
We need to understand the methods by which benefits are delivered to claimants, and to determine whether those methods are adequate. The Minister referred to take-up. I welcome some of the improvements that he has introduced, such as the telephone support available to those of pensionable age who want a wider assessment of all the benefits that they can claim, but it is notable that the trend in Government has been towards delivering services over the telephone and away from face-to-face contact. It may be difficult, if not impossible, to deal with many claimants over the telephoneparticularly the most vulnerable, who will be claiming many of the benefits that we are discussing.
The social fund commissioners annual report, with which Members will be familiar, deals specifically with the delivery of social fund support over the telephone. Seven call centres were examined, and although one proved to be relatively successfulone call in five was answeredastonishingly, only seven calls in 400 were answered overall. If we want benefits to reach the people who claim them, that certainly needs to be improved. The Minister spoke of his wish to pursue pilots on take-up. I am sure that he has some good ideas, but I note in passing that although the Department paid for a couple of extra staff members for Highland council in my constituency to facilitate take-up, it withdrew the funding this year. Even that fairly small-scale assistance in one part of the country has now been removed.
The Government still have not told us whether they intend to replace the Post Office card account, which many claimants use to collect their benefits, with a product delivered by the Post Office. I hope that that will be clarified shortly. I also observe an uncomfortable straw in the wind: the Government have not provided for the new local housing allowance, which replaces housing benefit, to be collected through a post office card account.
The hon. Member for Hertsmere rightly draw attention to the amount of fraud and error in the benefits system. The Government have made progress in reducing fraud, but at the expense of a significant increase in both official and customer error. I would link the customer error directly to the complexity of the system.
Danny Alexander: I am grateful to the Minister, particularly if he is hinting that the next Budget might include changes to that payment. Many pensioners would appreciate that, as in 2003 the payment met 50 per cent. of the Governments estimate of the average fuel bill, but in 2008 that proportion has fallen to only 27 per cent. I hope that all Members will welcome the campaign launched today by the Daily Mirror.
Danny Alexander: I am grateful for your guidance, Mr. Deputy Speaker. I was simply trying to highlight that the winter fuel payment is an important issue for pensioners, who are also in receipt of many of the other benefits that we are discussing today.
It is important that we work to get extra income to pensioners across the board. As has been said, the basic state pension should be uprated in line with earnings. The importance of that is highlighted by the fact that many of the costs that pensioners facenot least energy costsare increasing dramatically. The fact that we have seen again today scandalous and excessive energy company price rises, which pensioners will pay out of their pension credit, their basic state pension and their winter fuel payment, makes the pointwhich I hope the Minister is taking on boardthat the Government must reconsider the current amount of the winter fuel payment.
As has been said, pensioner poverty is an important issue. It would be churlish not to recognise that, over the past 10 years, there have been improvements in terms of tackling it, yet the take-up of benefits is still a major problem. The Government have introduced the pension credit, a means-tested system, to top up the basic state pension, but up to 1.7 million pensioners do not claim the pension credit to which they are entitled. Likewise, many pensioners are entitled to council tax benefit, which is also dealt with in the orders before us today. In the past 10 years, that benefit has increased by 87 per cent. yet it is claimed by only 53 per cent. of pensioners who are entitled to it.
Todays uprating statement is a huge missed opportunity in terms of pensioner poverty in that it fails once again to announce the uprating of pensions in line with earnings. During the passage of the Pensions Act 2007, we argued that that should be introduced this year. It has not been. The Government have still not even said when they intend to do so; it might be in 2012, or it might not be until as late as 2015. As the hon. Member for Newport, West rightly observed, that means that the value of the basic state pension will fall still further behind average earnings. I have made the point before that that amounts to a serious erosion of pensioner incomes, particularly for those who do not claim pension credit because it is complex or because they find means-testing intrusive. Those are understandable reasons.
We should move towards having a much higher basic state pension. The objective should be a citizens pension, so that every pensioner has, on the basis of residency, a basic state pension that keeps them out of poverty. That is, I believe, an obligation of the state, and the citizens pension is the means to deliver it in such a way that we can ensure that it goes to every pensioner who needs that money.
It is also worth noting that the uprating of pensions applies only to some pensioners. It applies to pensioners in this country, of course, and to some British pensioners who have moved abroad, but it does not apply to many British pensioners who have moved abroad to live in certain countries, such as Canada, Australia and New
Zealand. There is a genuine injustice in that, which the Government have recognised in previous debates but have done nothing to address. Again, the Minister needs to examine that issue.
We are dealing with a number of benefits, rates and so on relating directly to children. Worryingly, it is looking ever more difficult for the Government to meet their child poverty targets, because child poverty rose in the last year for which we have figures. That is appalling, particularly given that poverty has been entrenched in many families for generation after generation. I would like child benefit to be used much more directly to address that problem; indeed, we have put forward proposals for increasing child benefit so that more families with children can be helped out of poverty.
As for the tax credits system, although that system has benefited many families, it is equally true that 40 per cent. of families claiming tax credits have received overpayments or underpayments and a great deal of hardship has been caused, particularly by the overpayments. About 2 million families were overpaid tax credits in the last year for which we have figures, creating a financial rollercoaster and costs, and in many cases causing hardship. The system is supposed to help people in work who need their income supplemented to get them out of poverty. That is why moving to a system of fixed awards is the right way to go, as opposed to the present fluctuating system. I hope that the Minister will pass on my comments to his Treasury colleagues, who are responsible for the tax credits system although we are dealing with its uprating today, so that a degree of stability, which is vital for so many families, can be introduced into it.
Todays uprating statement does little to address the high marginal deduction rates that many people still face. Although the number of people who, when they get into work, face marginal deduction rates equivalent to tax rates of more than 100 or 90 per cent. has been reduced, a substantial body of people in the middle face marginal deduction rates ranging from 60 to 80 per cent. That is unacceptable. If the Minister were to say that he wished to introduce an income tax rate for higher earners of 60, 70 or 80 per cent., there would rightly be howls of protest. When the tax credits system interacts with the benefits systemhousing benefit, council tax benefit and so onand people keep only 10, 15 or 20p of every extra pound they earn, that system should be seen as no more acceptable for people on low incomes than higher-rate income tax would be for people on high incomes.
One further pressing issue is missing from this statement, namely the way in which housing benefit works, particularly for young people under 25 who still face the scandalous single room rate. That rate means that people below that age receive a lower level of housing benefit. That causes hardship and difficulties, not least for young people starting out in life who have left home or who are trying to get out of care. It is important that the Government do not lose sight of that problem. Ministers have been repeatedly pressed to drop the single room rate, which childrens organisations, anti-poverty organisations and housing organisations, such as Shelter, protest against. If the
Government are serious about dealing with poverty among young people, they must directly address that issue.
I obviously welcome the overall uprating of benefits. However, there are serious problems in our welfare system relating to adequacy, complexity and the incentives for people to get back into workthose incentives must be a crucial part of the welfare system. The Government have a very long way to go before they can claim to have met the aspirations that the Minister set out in his opening speech.